Is it possible to validate the collection using the Validation Block, so that the validation results returned for each failing object are something along the lines of "Duplicate Key Detected for Field1 + Field2 key"?

I don't believe it is, but I want to check before I implement anything. Ideally I am looking to make the configurable via XML.

It is possible to validate a collection of object using VAB but since there's no built-in validator in entlib that can handle the validation logic that you want, you would definitely need to create your own validator. You can then create your
own validation message.